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As of 1 March this year, the Australian Foreign Investments Review Board (FIRB) amended its Foreign Investment Policy in two important aspects:

the higher monetary threshold for foreign investments in non-sensitive sectors that previously applied only to US investors, has been extended to New Zealand investors. As of 1 January 2013, that higher monetary threshold is A$1,078 million (as opposed to the general A$248 million threshold); and

the term “foreign government investor” has been introduced in the context of direct investments to clarify what FIRB considers to be a direct investment by a foreign government controlled entity which, regardless of the value of the proposed investment, is expected to be notified to FIRB.

Because of the broad definition given to the term, an entity that may not have traditionally been considered a “foreign government investor” or “foreign governmentowned” may now find that it will need to comply with the FIRB notice requirements.

"Foreign government investor" is defined to include:

a body politic of a foreign country;

an entity in which governments, their agencies or related entities from a single foreign country have an aggregate interest (direct or indirect) of 15% or more;

an entity in which governments, their agencies or related entities from more than one foreign country have an aggregate interest (direct or indirect) of 40% or more; and

an entity that is otherwise controlled by foreign governments, their agencies or related entities, and any associates, or could be controlled by them including as part of a controlling group.

This means that Australia’s Foreign Investment Policy now recognises expressly associations between government-controlled entities in the same foreign country.

Another aspect to note is that foreign government investors regulated by the Australian Prudential Regulation Authority as “Authorised Deposit -taking Institutions” are exempted from the requirement to give prior notice to FIRB when taking security over Australian assets in certain cases. Accordingly, an exemption will occur where a foreign government investor takes security as part of a lending agreement entered into in the ordinary course of carrying on a money-lending business, or enforcing such a security unless, as a result of that security being enforced, the relevant foreign government investor gains control over Australian assets and retains them for more than 12 months.

This exemption is likely to speed up the availability of funds to Australian borrowers and investments.

For further information, please see the “Foreign Investments” section of Addisons’ booklet entitled “Conducting Business in Australia – March 2013” or FIRB’s website at http://www.firb.gov.au/content/default.asp.